Amazon kills affiliate program in Colorado thanks to taxes

Colorado residents who use Amazon's affiliate program to make money from …

Amazon has pulled the plug on its affiliate program in Colorado thanks to a new state regulation on sales tax collection. The company sent a notice to its Colorado-based affiliates Monday morning to let them know about the decision, urging residents who depend on the affiliate program to contact their lawmakers if they want the program back.

Most states only require retailers to collect sales tax if they have a sufficient enough brick-and-mortar presence thanks to a 1992 Supreme Court decision on Quill Corp. v. North Dakota. Despite this, a handful of states have tried to pass laws in recent years (often dubbed the "Amazon Tax") that would force Amazon to start collecting sales tax if their affiliates—that is, those who use Amazon's affiliate links on their own sites or blogs in order to earn a return on referrals—are based in those states.

The Colorado law in question is HB 10-1193, which targets sales made by affiliates through out-of-state retailers such as Amazon. Because the affiliate lives in Colorado and is "targeting" other Colorado residents (in sort of a roundabout way via the Internet, since the Internet really targets everyone in the world), state legislators feel that Amazon should collect and pay Colorado sales taxes.

According to Amazon's e-mail to affiliates posted by Global Geek News, "[t]he new regulations do not require online retailers to collect sales tax. Instead, they are clearly intended to increase the compliance burden to a point where online retailers will be induced to 'voluntarily' collect Colorado sales tax—a course we won't take."

As for current payments, everything earned before March 8 will be paid out by the end of the month, but Amazon won't pay for any further referrals after today. Amazon says that it will still sell its products to customers in Colorado and advertise through other channels, including through its affiliates in other states. Ouch.

Colorado isn't the first state to try and get taxes out of Amazon through its affiliate program. New York first started the trend by passing a very similar law in 2008, which caused Amazon to file a lawsuit. The retailer argued that it does not own or lease any space in the state of New York and has no representatives soliciting business there. Similarly, as noted by NPR, Rhode Island and North Carolina have also passed laws along these lines—Amazon responded to those by simply cutting off its affiliate programs in those states like it did with Colorado. (Presumably, Amazon has not cut off affiliates in New York yet because the market is too big to give up.)

Amazon's letter makes it clear that the company believes HB 10-1193 is neither "constitutionally-permissible" nor evenhanded. Indeed, with the Supreme Court ruling in place, it looks as if these states are just trying to find workarounds, especially since they are obviously hurting for tax revenue. Amazon urges its (former) Colorado associates to contact the General Assembly and Colorado Governor Ritter over the issue.